All posts tagged Hudson City Bancorp

M&T Bank said the Federal Reserve has expressed concerns about its anti-money-laundering compliance program and other procedures, concerns that will slow its pending $3.7 billion purchase of Hudson City Bancorp Inc.

Associated Press

M&T, which said the concerns relate to its procedures tied to the Bank Secrecy Act, has hired an outside consulting firm to help address the Fed’s concerns. The act includes requirements that help detect and prevent money laundering. Several major banks have been hit with enforcement actions recently over anti-money laundering lapses.

“Conversations with bank managements and directors suggest that some thawing has occurred in the stalemate between buyers and sellers, as sellers’ boards of directors have become more accepting that difficult conditions are likely to persist,” Sterne Agee analysts wrote in a research report today.

Hudson City Bancorp wanted to expand. In the end, the New Jersey bank decided that selling itself to M&T Bank for $3.7 billion would be better than a plan to hire more than 200 bankers, Hudson City’s Chairman and CEO Ronald Hermance said today.

Hudson City was struggling amid the low interest rate environment that weighed on profitability. In response, Hermance said the bank was looking to aggressively build out products including multi-family real-estate and commercial lending. Hudson City had largely focused on mortgage lending in the past.

Hermance said on a conference call the company presented to its board a plan to hire about 230 bankers. But soon after, Buffalo’s M&T Bank reached out, and Hermance said the board decided that was a way to deliver to customers its plan “much faster.”

The CEO said there was no competitive process or other potential acquirers for Hudson City, and that the deal moved quickly after M&T inquired about a deal.

“It was not a bidding process at all,” Hermance said.

M&T Bank now plans to do the same expansion, it said, and would hire approximately 200 bankers to build out Hudson City.

The bank said the deal would actually add to its capital position and touted the two banks as having similar cultures and philosophy’s on lending. M&T Chairman CEO Robert Wilmers said the geographic fit, which gives M&T a foothold in New Jersey, was an added bonus to the deal, its biggest ever.

Many of the top deals since 2008 were stakes taken by investment groups during the height of the financial crisis.

In terms of bank purchases, five deals since 2008 come in ahead of M&T”s purchase of Hudson City: Bank of America’s acquisition of Merrill Lynch for $18.5 billion; Wells Fargo’s purchase of Wachovia for $12.7 billion; Capital One’s transaction for ING Direct USA for $8.9 billion; PNC’s buy of National City for $4.9 billion; and Bank of Montreal’s deal for Marshall & Ilsley for $4.3 billion deal, according to Dealogic.

The deal is also M&T’s largest deal, CEO Robert Wilmers said in a memo to employees. M&T, which was advised on the deal by Evercore and law firm Wachtell, Lipton, Rosen & Katz, is currently the 31st largest bank by assets in the country. Hudson City, which was advised by J.P. Morgan and law firm Sullivan & Cromwell LLP, is No. 42.

Combined the two would be a top 25 bank in the country by assets.

M&A activity among banks remains muted. To date there have been $13.6 billion in bank deals reached this year, according to Dealogic. That’s down from the $26.9 billion struck all of last year and the $23.7 billion of deals reached in 2010. And those total come in well also well below the pre-crisis and crisis levels. In 2006, $113.4 billion of deals were reached, and in 2008, $89 billion were done.

M&T Bank’s purchase of Hudson City Bancorp for $3.7 billion in cash and stock is among the biggest bank deals reached since the crisis and shows M&T’s continued drive to expand.

Associated Press

The Buffalo bank already had closed the big purchase of Wilmington Trust last year and had been expected to be in the running for the New York branch network being shed last year by HSBC. It didn’t get that deal, which First Niagara and KeyCorp scooped up, but now has significantly added to its New Jersey and New York branch networks. The network of 135 branches Hudson City is smaller, however, than the 195 branches First Niagara bought.

Bankers have been eagerly waiting for a wave of bank mergers but have seen few of the multi-billion size. M&T’s Wilmington Trust deal was done on the cheap. Capital One, First Niagara and KeyCorp all grabbed assets out of the retreating HSBC, and some banks still struggling with real-estate loans gone bad in the South have also sold.

But Hudson City’s story is more about the difficulty banks have turning a profit in the current environment. Last month, when Hudson City reported its second quarter, it said its net interest margin, the profitability on lending, had fallen again. The bank blamed low interest rates for making it difficult to grow profits the way it had in the past.

About Deal Journal

Deal Journal is an up-to-the-minute take on the deals and deal makers that shape the landscape of Wall Street, including mergers and acquisitions, capital-raising, private equity and bankruptcy. In short, wherever money changes hands. Deal Journal is updated throughout each trading day with exclusive commentary, analysis, data, news flashes and profiles. The Wall Street Journal’s David Benoit is the lead writer, with contributions from other Journal reporters and editors. Send news items, comments and questions to deals@wsj.com.

Dealpolitik is Ronald Barusch's strategic look at deals currently making the headlines as well as the major forces at work in the deal-making world. He was a M&A lawyer with Skadden, Arps, Slate, Meagher & Flom for over 30 years. He retired in 2010 after 25 years as a partner at the firm. Click here for his current and archived columns.